The Peugeot RCZ has long been more about style than substance. The flashy two-door coupe went on sale in September 2010 with the aim of offering Australian buyers a more affordable coupe alternative to the likes of the German luxury brands, though it was never really worthy of being considered a performance two-door.

Now, however, things have changed. That’s because the RCZ line-up has a new flagship model – the RCZ R – which pushes the swoopy coupe’s performance to an entirely new level.

Powered by a 1.6-litre four-cylinder turbo engine, the RCZ R pumps out a massive 199kW of power at 6000rpm and 330Nm of torque between 1900-5500rpm. Peugeot says the car “sets a record for specific power in the category”, with 124kW per litre of engine capacity.

It’s front-wheel drive, and is only available with a six-speed manual transmission – which could be enough to stop some people reading already. But for drivers who don’t mind a bit of shift-work, read on.

The engine has been wholly developed in-house by Peugeot Sport, and has only been applied to the RCZ R up until now (we’d expect it to be found in a production 308 R and possible 208 R in the near future). Changes such as a new twin-scroll turbo, larger intercooler and modified exhaust help it breathe easy, while the internals have been altered with a reinforced block, upgraded conrods and polymer-coated bearings.

It wouldn’t be unreasonable to expect such a highly-strung engine to feel overwhelmed, but this tiny four feels up to the task. The power delivery is unexpectedly linear, with commendable response to impromptu pedal prods at speed. On the open road it cruises comfortably in sixth gear, revving at about 2750rpm at 110km/h – high, but not annoyingly so – and around town the engine is workable and doesn’t get bogged down as much as some other high-output turbocharged fours we’ve driven. That said, there’s a little bit of lag before 2000rpm, and the exhaust note, while sporty when being driven as such, could grow tiring as it is quite loud inside the cabin.

The six-speed manual ‘box has been strengthened for hard work, but it feels slick and crafty, with a lovely action and light clutch application.

Peugeot claims a remarkable fuel use figure of just 6.1 litres per 100km, but during our 220km test loop that included highways, urban and spirited driving, we saw 10.1L/100km. The other claim of note is its 0-100km/h sprint time, which the French brand says is over with in just 5.9 seconds – an entirely believable assertion.

Tasked with getting all that power to the ground is a Torsen front differential, which does a reasonable job of things for the most part. However, we noticed that under harder throttle the wheels could spin, and there were noticeable amounts of torque-steer to ensure the driver needed to keep their mind (and hands) on the job. Along with the diff, the track of the R has been widened to give it a more surefooted stance, and it is considerably more capable in terms of cornering performance compared to the regular RCZ.

The steering is a vast improvement over the existing RCZ, too, with more feel, better feedback and quicker reaction times than the standard car. It can still be a little slow on turn-in, but once you start to twist the wheel a bit further the front-end bites down nicely. There’s only a slight hint of understeer in sharper hairpin bends, but the chassis and its 19-inch Goodyear Eagle F1 asymmetric rubber allow it sufficient traction through corners, and it feels balanced through faster sweeping bends or tighter, shallower corners.

Peugeot has completely retuned the suspension for the R version of the RCZ, with revised damper settings and increased spring stiffness. Indeed, Peugeot says the front-end is 14 per cent stiffer, while the rear rigidity has been increased by 44 per cent. The stability and traction control system – which have been recalibrated for the RCZ R and can be turned off completely for track driving – is quite permissive in its operation.

The result of the stiffer suspension is a firm ride that may be too much for those who would previously have bought an RCZ just for its looks. That said, it is not unliveable, and the body never bucks too sharply or wobbles unnervingly over bumps. Indeed, it is composed and quite well mannered on smooth road surfaces, though we’d suggest urban-dwellers may not be so taken by its manners.

Enthusiasts may be left wishing for better brake feel from the Alcon brakes. Despite being fitted with large 380mm discs all-around and four-piston front calipers, and while far from disappointing in terms of stopping performance, our test car’s stoppers were a little dull on initial application.

Not only has the sporting pedigree of the RCZ R been pushed up – so has its price. The model is limited in its volume and only 30 examples will be sold in Australia at a price of $68,990 plus on-road costs. That makes the RCZ R the most expensive Pug in recent history, but as with the regular RCZ, it doesn’t lack for standard equipment.

The additional $10,000 over the existing range brings a range of changes inside and outside of the car, including those 19-inch alloys, a carbonfibre-look roof turret and fixed rear wing for better aerodynamic performance.

The cockpit features a leather and Alcantara-trimmed cabin with red stitching throughout, R badging on the dashboard, and a new set of superbly comfortable and well bolstered sports bucket seats. Annoyingly, though, it misses out on the heated seats seen in cheaper versions of the RCZ.

However, it does carry over many of items seen on the standard equipment list of the cheaper versions, such as front and rear parking sensors and satellite navigation. A reverse-view camera would be a far more useful addition, as the RCZ’s curvy top and broad fenders mean it is quite challenging to see out of.

Along with the dash-top sat-nav pod is Bluetooth phone and audio streaming, which – unlike many cars from competing brands – allows phones to be paired on the move. The media system takes some getting used to and lacks the intuitiveness of a touchscreen system, but after just a few hours in the car the driver will have come to grips with the controls. A digital speedometer wouldn’t go astray, either.

As is the case with the existing RCZ, there are some shortfalls inside the cabin. Along with dreadful outward vision, there’s a lack of small item storage and only one cup holder between the front seats. The rear seats are best left for luggage or littlies, and the seat backrest can be folded down to allow 760 litres of cargo space (or a hatchback-rivalling 384L as standard).

The RCZ R is covered by the same capped price service program as is seen on the standard model, with five years coverage at an average yearly fee of $468. Visits are due every 12 months or 15,000km. The car is also covered by a three-year, 100,000km warranty.

In summary, the Peugeot coupe now has some serious cred in the sports car segment. Conservative consumers would more likely opt for a BMW 2 Series or Audi TT (which will be replaced by a new model early in 2015), and we could understand why. But for those who like a bit of ‘pow’ to go with their ‘wow’, the RCZ R makes a convincing argument.